NAB Challenger Acquisition To Come Under Competition Regulator Microscope

Post by Sharat on September 15, 2009 · Under Business News, Company News, Mergers & Acquistions, banking, home loans, mortgages · Comment

Australian banking major National Australia Bank’s (NAB) acquisition of Challenger’s mortgage origination and aggregation business for $385 million, will be scrutinised by the Australian competition regulator after concerns were raised over the increasing dominance in mortgage lending by the Big Four banking groups.

NAB’s ability to deny rivals from accessing Challenger platforms including Choice and Fast broking, should it end up controlling them will come under the regulators microscope.

The Australian Competition and Consumer Commission (ACCC) will also be consulting with market participants whether they believe that acquisition would give NAB the ability to substantially increase its market share in mortgage lending.

In August, NAB revealed its intention to acquire the mortgage origination and aggregation businesses of Challenger Financial. The deal would result in NAB becoming a key player in mortgage broking.

The announcement of the transaction came at a time where concern over the increasingly concentrated Australian banking landscape has been rising. Smaller regional lenders have been voicing their frustration over what they feel is an unfair advantage held by the banking majors for access to the Federal sovereign funding guarantee. Whilst mortgage lending has come to be almost 100 per cent dominated by the Big Four during the last quarter.

The major banking groups account for nearly 90 per cent of new mortgages written compared to 60 per cent prior to the onset of the credit market freeze. Some analysts suggest however when the figures are analysed to include indirect lending to non bank financial companies and mortgage brokers, market share held by the Big Four is closer to 100 per cent.

Under the terms of the purchase, NAB is set to acquire Challenger’s mortgage lending and distribution businesses, whilst simultaneously picking up its mortgage loan portfolio worth an estimated $4 billion.

Despite NAB acquiring a non banking financial company, ACCC chairman Graeme Samuel said the deal would come under rigorous review and is expected to finalise its view early next month.

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